Grupo Financiero HSBC Q3 2011

RNS Number : 1710R
HSBC Holdings PLC
31 October 2011
 



 

 

GRUPO FINANCIERO HSBC, S.A. DE C.V.

THIRD QUARTER 2011 FINANCIAL RESULTS - HIGHLIGHTS

 

·    Net income before taxes for the nine months to 30 September 2011 was MXN3,776m, an increase of MXN1,457m or 62.8% compared with MXN2,319m for the same period of 2010. The 2011 results were affected by restructuring charges, the majority of which related to a reorganisation of the bank's regional services. Excluding the effect of these charges, net income before taxes would have beenMXN4,866m, up by MXN2,547m or 109.8% compared to the same period of 2010.

 

·    Net income for the nine months to 30 September 2011 was MXN2,720m, an increase of MXN833m or 44.1% compared to the same period of 2010. Excluding the effect of the restructuring charges, net income would have been MXN3,483m, up MXN1,596m or 84.6% compared with the nine months to September 2010.

 

·    Total operating income, net of loan impairment charges, for the nine months to 30 September 2011 was MXN22,566m, an increase of MXN3,835m or 20.5% compared with MXN18,732m for the same period of 2010.

 

·    Loan impairment charges for the nine months to 30 September 2011 were MXN4,750m, a decrease of MXN2,758m or 36.7% compared with MXN7,508m for the same period of 2010.

 

·    Net loans and advances to customers were MXN177.1bn at 30 September 2011, an increase of MXN24.2bn or 15.8% compared with MXN152.9bn at 30 September 2010. Total impaired loans as a percentage of gross loans and advances to customers remained at 3.6%, as reported at 30 September 2010. The coverage ratio (allowance for loan losses divided by impaired loans) was 158.4% compared with 175.2% at 30 September 2010.

 

·    At 30 September 2011, deposits were MXN280.7bn, an increase of MXN35.0bn or 14.2% compared with MXN245.8bn at 30 September 2010.

 

·    Return on equity was 7.4% for the nine months to 30 September 2011 compared with 5.2% for the same period in 2010.

 

·    At 30 September 2011, the bank's capital adequacy ratio was 15.2% and the tier 1 capital ratio was 11.6% compared with 15.9% and 12.3% respectively at 30 September 2010.

 

·    From the first quarter of 2011, regulatory requirements issued by the Comisión Nacional Bancaria y de Valores (CNBV) require financial figures for both the insurance and bond companies, HSBC Seguros and Fianzas Mexico respectively, to be presented on a consolidated basis. As a result, the nine months to 30 September 2010 financial results have been re-stated to be comparable with the same period of 2011.

 

·    The sale of HSBC Afore, S.A. de C.V. to Principal Financial Group, S.A. de C.V. was successfully completed in August 2011.

 

HSBC Mexico S.A. (the bank) is Grupo Financiero HSBC, S.A. de C.V.'s (Grupo Financiero HSBC) primary subsidiary company and is subject to supervision by the Mexican Banking and Securities Commission. The bank is required to file financial information on a quarterly basis (in this case for the nine months to 30 September 2011) and this information is publicly available. Given that this information is available in the public domain, Grupo Financiero HSBC, S.A. de C.V. has elected to file this release.

 

Results are prepared in accordance with Mexican GAAP (Generally Accepted Accounting Principles).

 

 

Overview

 

Despite the current global economic uncertainties, the Mexican economy is expected to be able to withstand any potential economic slow-down, especially in the US. This is based on Mexico's sound macroeconomic position, a competitive and diversified exports base and a stronger domestic market.

 

Inflation is expected to be 3.5% for 2011 and no change is expected to monetary policy interest rates until the fourth quarter of 2012.

 

For the nine months to 30 September 2011, Grupo Financiero HSBC's net income was MXN2,720m, an increase of MXN833m or 44.1% compared with the same period of 2010. Higher trading income and lower impairment charges were partially offset by lower net interest income, net fee income and increased administrative expenses, the latter largely impacted by the restructuring charges incurred during the first half of 2011.

 

Net interest income was MXN16,129m, a decrease of MXN187m or 1.1% compared with the same period of 2010. This decline was mainly driven by higher funding costs and a contraction in spreads coupled with lower balances in the credit card portfolio, which were partially offset by higher spreads on available-for-sale securities.

 

Loan impairment charges were MXN4,750m, a decline of MXN2,758m or 36.7% compared with the same period of 2010. This decrease is due to a general improvement in credit quality across our portfolios and lower credit card volumes. In addition, a new credit provisioning methodology for States & Municipalities was approved by the CNBV and applied in September 2011. This resulted in a net release of MXN108.7m. The new methodology is based on an expected loss approach.

Net fee income was MXN4,448m, a decrease of MXN439m or 9.0% compared with the same period of 2010. This reduction was mainly a result of lower credit card volumes as well as reduced account services and ATM fees. Regulatory restrictions applied since the beginning of the current year affected fee income by limiting the fees that can be charged for ATM and customer deposit services.

 

Trading income was MXN2,502m, an increase of MXN141m or 6.0% compared with the same period of 2010. The improvement in trading income is mainly the result of a strong performance in derivatives and the sale of one of our equity investments, partially offset by lower foreign exchange and debt trading results.

 

Other operating income was MXN4,237m, an increase of MXN1,562m or 58.4% compared to the same period of 2010. This increase is driven by the gain on the sale and leaseback of certain branches in the network, the sale of HSBC Afore, tax recoveries from previous years and lower operational losses recognised during the year.

 

Administrative and personnel expenses were MXN18,825m, an increase of MXN2,410m or 14.7% compared with the same period of 2010. This increase is mainly driven by IT-related costs, higher personnel expenses and restructuring charges. Excluding the effect of the restructuring charges, the increase in expenses would have been MXN1,320m or 8.0% compared with the same period of 2010.

 

The performance of non-banking subsidiaries contributed positively to Grupo Financiero HSBC's results, particularly HSBC Seguros, which reported a net profit of MXN1,094m for the nine months to 30 September 2011, a 14.4% increase when compared with the same period of 2010. The higher results reported by HSBC Seguros were driven by increased product sales, mainly life products, reflecting a 7.3% increase in earned premiums, in addition to flat operating expenses. The claims ratio decreased by 4.9% when compared to the same period of 2010, mainly due to (T-5) individual life products.

 

Net loans and advances to customers increased MXN24.2bn or 15.8% to MXN177.1bn at 30 September 2011 compared to 30 September 2010. This increase is mainly driven by growth in the commercial portfolio. The consumer portfolio also increased, driven by higher personal and payroll loans, which more than offset a decrease in credit cards.

 

At 30 September 2011, total impaired loans increased by 11.2% to MXN6.5 bn compared with 30 September 2010, mainly as a result of recent restructures, partially offset by a reduction in impaired consumer loans, as collections and underwriting processes were tightened. Total impaired loans as a percentage of gross loans and advances to customers remained at 3.6% as reported at 30 September 2010.

 

Total loan loss allowances at 30 September 2011 were MXN10.2bn, an increase of MXN52m or 0.5% compared to 30 September 2010. The total coverage ratio (allowance for loan losses divided by impaired loans) was 158.4% at 30 September 2011 compared with 175.2% at 30 September 2010. This reduction in the coverage ratio is mainly the result of increased impaired loans.

 

Total deposits were MXN280.7bn at 30 September 2011, an increase of MXN35.0bn or 14.2% compared with 30 September 2010. This is the result of increased sales efforts and targeted promotions particularly for 'Advance', 'Inversion diaria', 'Inversion Express' and 'Premier' deposit products.

 

At 30 September 2011, the bank's capital adequacy ratio was 15.2% compared with 15.9% at 30 September 2010. The tier 1 capital ratio was 11.6% compared with 12.3% at 30 September 2010.

 

In March 2011, the bank paid a dividend of MXN1,800m representing MXN1.095 per share to Grupo Financiero HSBC and Grupo Financiero HSBC paid a dividend of MXN3,520m representing MXN1.377 per share.

 

Business highlights

 

Retail Banking and Wealth Management (RBWM)

 

RBWM achieved strong sales in its consumer portfolio and continued repositioning the wealth management business from a product-focused approach to a relationship approach.

 

Our sales focus was targeted through campaigns aimed at providing solutions to customers' needs based on business intelligence; understanding our customers through their spending and saving patterns and proposing solutions using customer relationship management capabilities, and cross-selling to our existing customer base and expanding our payroll base.

 

Special focus continues to be placed on leveraging our global banking and commercial banking relationships to cross-sell our payroll service capabilities. As a result, personal and payroll loans sales reported a 63% year-on-year growth while balances increased 85% year-on-year.

 

Credit card balances across the industry remained flat. However, we have increased credit card sales by 4% compared to the last quarter. Average credit card balances decreased 5.7%, from MXN16,405m to MXN15,478m. During the period, several strategies were launched aimed at reducing the credit card seasonal balance decrease with campaigns such as purchases on instalments, balance transfers, credit limit increases and extended preferential rates

 

During the third quarter of the year, customer deposits, both time and demand, increased MXN12.5bn compared to 30 September 2010.

 

Commercial Banking

 

During the third quarter of 2011, Commercial Banking continued to report growth in deposits, up by 25%, while loans have increased 12%, both compared to 30 September 2010.

 

Our business proposition for Corporate & Structured Banking was established in three of the country's main cities (Mexico City, Guadalajara and Monterrey), which should enable us to provide specialised services to our corporate customers such as international trade, treasury and investment banking.

 

Several initiatives have been implemented aimed to support the underwriting of business banking credit facilities, such as preferential interest rates on first draw-downs and benefits to current customers.

 

We have continued to manage our State and Municipalities portfolio actively through continuous contact and advice to this segment's customers.

 

Global Banking and Markets

 

As of 30 September 2011, Global Markets continued to report good revenues in balance sheet management and trading.


In the Debt Capital Markets business, Grupo Financiero HSBC continued to consolidate its position as a leading underwriter in Mexico, maintaining its second place in the local debt capital market league tables. As of September 2011, we have placed and participated in bond issuances for a total transaction amount of MXN112.1bn, including United Mexican States (UMS), CEMEX, Inbursa, Santander, INFONAVIT, Bancomext, Alsea, Gas Natural, Interacciones, Scotiabank, Cadena Mexicana de Exhibición and ICA.

For the nine months to 30 September 2011, Global Banking's credit and lending business originated new lending to corporate clients in excess of MXN17.7bn, compared to MXN7.6bn for the same period of 2010.


The Project and Export Finance business also reported a strong performance, executing transactions worth US$570m.

We continued focussing on customer onboarding processes, developing incremental Global Market product business and executing transactions for Global Banking clients.


Global Banking continued to grow average balances, particularly in Client Bank Deposits which have reported a 61% increase in average balances compared to 30 September 2010.

 

Sale of HSBC Afore to Principal Financial Group

 

On 11 April 2011, Grupo Financiero HSBC signed an agreement to sell HSBC Afore, S.A. de C.V., its pension funds management business, to Principal Financial Group, S.A. de C.V. ('Principal') for a cash consideration of MXN2,360m (approximately US$198m). This sale transaction was successfully completed in August 2011.

 

Grupo Financiero HSBC 2011 financial results as reported to HSBC Holdings plc, our ultimate parent company, under International Financial Reporting Standards (IFRS)

 

For the nine months to 30 September 2011, on an IFRS basis, Grupo Financiero HSBC reported pre-tax profits of MXN7,231m, an increase of MXN2,899m or 66.9% compared with MXN4,332m in the first nine months of 2010. The 2011 results were affected by restructuring charges, the majority of which related to a reorganisation of the bank's regional services. Excluding the effect of these charges, net income before taxes would have been MXN8,321m, up by MXN3,989m or 92.1% compared to the same period of 2010.

 

The lower profit reported under Mexican GAAP is largely due to lower loan impairment charges as result of the different provisioning methodologies and the amount recognised as profit on the sale of the pension funds management business (Afore). The goodwill allocated under IFRS on the disposal of Afore is based on the goodwill held in the Grupo Financiero HSBC legal entity, but allocated on the HSBC Group cash generating unit basis. A reconciliation and explanation between the Mexican GAAP and IFRS results is included with the financial statements of this document.

 

About HSBC

 

Grupo Financiero HSBC, is one of the leading financial groups in Mexico with 1,078 branches, 6,062 ATMs, approximately eight and a half million total customer accounts and more than 19,000 employees. For more information, visit www.hsbc.com.mx.

 

Grupo Financiero HSBC is a 99.99% directly owned subsidiary of HSBC Latin America Holdings (UK) Limited, which is a wholly owned subsidiary of HSBC Holdings plc, and a member of the HSBC Group. With around 7,500 offices in over 80 countries and territories in Europe, the Asia-Pacific region, North and Latin America, the Middle East and Africa and with assets of US$2,691bn at 30 June 2011, HSBC is one of the world's largest banking and financial services organisations.

 

For further information contact:

 

London


Brendan McNamara

Alastair Brown

Group Media Relations

Investor Relations

Telephone: +44 (0)20 7991 0655

Telephone: +44 (0)20 7992 1938



Mexico City


Lyssette Bravo

Yordana Aparicio

Public Affairs

Investor Relations

Telephone: +52 (55) 5721 2888

Telephone: +52 (55) 5721 5192

 

 

Consolidated Balance Sheet

 



GROUP


BANK

Figures in MXN millions


30 Sep


30 Sep


30 Sep


30 Sep


2011


2010


2011


2010

Assets


















Cash and deposits in banks

 

55,376

 

70,241


55,376


70,238



 

 

 


 


 

Margin accounts


-

 

2


-


2



 

 

 


 


 

Investment in securities


163,264

 

162,002


145,470


146,757

  Trading securities


37,699

 

53,076


27,757


46,020

  Available-for-sale securities


110,467

 

92,815


110,467


92,516

  Held to maturity securities


15,098

 

16,111


7,246


8,221



 

 

 


 


 

  Repurchase agreements


7,668

 

-


7,668


-

 


 

 

 


 


 

  Derivative transactions


50,979

 

35,337


50,979


35,337

 


 

 

 


 


 

Performing loans


 

 

 


 


 

  Commercial loans


100,133

 

78,507


100,133


78,507

  Loans to financial intermediaries


6,341

 

7,051


6,341


7,051

  Consumer loans


29,101

 

27,076


29,101


27,076

  Mortgage loans


17,828

 

19,302


17,828


19,302

  Loans to government entities


21,880

 

25,343


21,880


25,343

Total performing loans


175,283

 

157,279


175,283


157,279

Impaired loans


 

 

 


 


 

  Commercial loans


2,014

 

1,809


2,014


1,809

  Consumer loans


1,256

 

1,826


1,256


1,826

  Mortgage loans


1,839

 

2,176


1,839


2,176

  Loans to government entities


1,352

 

-


1,352


-

Total impaired loans


6,461

 

5,811


6,461


5,811

Gross loans and advances to customers

 

181,744

 

163,090


181,744


163,090

Allowance for loan losses


(10,231)


(10,179)


(10,231)


(10,179)

Receivable

 

5,600


-


5,600


-

Net loans and advances to customers


177,113

 

152,911


177,113


152,911

Premium receivables


295

 

308


-


-

Accounts receivables from reinsurers and rebonding companies


284

 

419


-


-

Other accounts receivable


30,916

 

44,835


30,948


44,931

Foreclosed assets


195

 

167


191


167

Property, furniture and equipment, net

 

8,074

 

7,936


8,073


7,932

Long-term investments in equity securities

 

250

 

195


170


119

Long-term assets available for sale


2

 

2,431


3


-

Deferred taxes


5,508

 

4,102


5,386


4,088

Goodwill


1,218

 

1,218


-


-

Other assets, deferred charges and intangibles

 

5,135

 

5,075


4,642


4,623

Total assets


506,277

 

487,179


486,019


467,105

 



GROUP


BANK

Figures in MXN millions


30 Sep


30 Sep


30 Sep


30 Sep


2011


2010


2011


2010

Liabilities









Deposits


280,728

 

245,777


281,464


245,986

  Demand deposits


159,366

 

143,392


160,102


143,601

  Time deposits


117,100

 

98,123


117,100


98,123

  Issued credit securities


4,262

 

4,262


4,262


4,262

 


 

 

 


 


 

Bank deposits and other liabilities

 

28,927

 

13,869


28,927


13,869

  On demand


-

 

3,000


-


3,000

  Short-term


27,243

 

9,282


27,243


9,282

  Long-term


1,684

 

1,587


1,684


1,587

 


 

 

 


 


 

     Repurchase agreements


17,176

 

38,176


22,598


42,476

     Stock borrowing


4

 

-


4


-

Settlement accounts


-

 

10,606


-


10,606

Collateral sold


12,095

 

8,715


6,673


4,415

Derivative transactions


50,669

 

38,175


50,669


38,175

Technical reserves


10,778

 

10,389


-


 -

Reinsurers


90

 

140


-


-

Other payable accounts


45,965

 

60,553


46,680


59,741

  Income tax

 

1,996

 

1,466


1,113


1,001

  Contributions for future capital increases

 

-

 

-


2,013


-

  Sundry creditors and other accounts Payable

 

43,969

 

59,087


43,554


58,740

 


 

 

 


 


 

Subordinated debentures outstanding


10,435

 

10,074


10,435


10,074

 


 

 

 


 


 

Deferred taxes


622

 

762


587


724

 


 

 

 


 


 

Total liabilities


457,489

 

437,236


448,037


426,066



 

 

 




 

Equity


 

 

 


 


 

Paid in capital


32,673

 

32,678


25,605


25,605

  Capital stock


5,111

 

9,434


5,087


5,087

  Additional paid in capital


27,562

 

23,244


20,518


20,518

 


 

 

 


 


 

Other reserves


16,105

 

17,253


12,374


15,431

  Capital reserves


1,832

 

1,726


11,069


14,449

  Retained earnings


11,262

 

13,058


-301


-

  Result from the mark-to-market of available-for-sale securities

 

758

 

890


758


750

  Result from cash flow hedging transactions

 

(467)

 

(308)


(467)


(308)

  Net income


2,720

 

1,887


1,315


540

Minority interest in capital


10

 

12


3


3

Total equity


48,788

 

49,943


37,982


41,039

Total liabilities and equity


506,277

 

487,179


486,019


467,105

 

 



GROUP


BANK

Figures in MXN millions


30 Sep


30 Sep


30 Sep


30 Sep


2011


2010


2011


2010

Memorandum Accounts


2,967,174

 

2,626,413


2,872,208


2,512,847




 

 




 

Third party accounts


96,899

 

86,560


51,821


51,096

Clients current accounts


-169

 

-37


-


-

Custody operations


33,640

 

25,462


-


-

Transactions on behalf of clients


11,607

 

10,039


-


-

Third party investment banking operations, net


51,821

 

51,096


51,821


51,096

 


 

 

 




 

Proprietary position


2,870,275

 

2,539,853


2,820,387


2,461,751

Guarantees granted


14

 

21


14


21

Contingent assets and liabilities


95

 

119


95


119

Irrevocable lines of credit granted


19,193

 

17,785


19,193


17,785

Goods in trust or mandate


313,369

 

282,699


313,370


282,699

Goods in custody or under administration


253,350

 

265,633


248,240


260,522

Collateral received by the institution


35,774

 

8,504


35,774


8,432

Collateral received and sold or delivered as guarantee


36,971

 

12,037


31,561


7,739

Values in deposit


53

 

53


-


-

Suspended interest on impaired loans


230

 

258


230


258

Recovery guarantees for issued bonds


34,191

 

48,011


-


-

Paid claims


56

 

13


-


-

Cancelled claims


24

 

17


-


-

Responsibilities from bonds in force


3,416

 

3,591


-


-

Other control accounts


2,173,539

 

1,901,112


2,171,910


1,884,176

 

 

 

Consolidated Income Statement

 



GROUP


BANK

Figures in MXN millions


30 Sep


30 Sep


30 Sep


30 Sep


2011


2010


2011


2010

Interest income


22,674


21,459


22,098


20,972

Interest expense


(7,534)


(6,012)


(7,548)


(6,005)







 



Earned premiums


2,277


2,171


-


-

Increase in technical reserves


(214)


(228)


-


-

Claims


(1,074)


(1,074)


-


-




 



 



Net interest income


16,129


16,316


14,550


14,967



 

 



 



Loan impairment charges


(4,750)


(7,508)


(4,750)


(7,508)

Risk-adjusted net interest income

 

11,379


8,808


9,800


7,459



 

 

 


 



Fees and commissions receivable


5,953


6,537


5,649


6,271



 


 


 



Fees payable


(1,505)


(1,650)


(1,063)


(1,020)



 


 


 



Trading income


2,502


2,361


2,011


1,905



 


 


 


 

Other operating income


4,237


2,675


4,313


3,057



 

 



 



Total operating income


22,566

 

18,731


20,710


17,672




 



 



Administrative and personnel expenses


(18,825)


(16,415)


(19,031)


(16,795)



 

 

 


 



Net operating income


3,741


2,316


1,679


877



 

 

 


 



Undistributed income from subsidiaries


35


3


35


-



 

 

 


 



Net income before taxes

 

3,776


2,319


1,714


877

Income tax

 

(1,524)


(1,003)


(652)


(543)

Deferred income tax


275


229


234


197

Net income before discontinued operations


2,527


1,545


1,296


531



 

 

 


 



Discontinued operations


173


333


-


-



 


 


 



Minority interest


20


9


19


9










Net income


2,720


1,887


1,315


540

 

 

 

Consolidated Statement of Changes in Shareholders' Equity

 

GROUP

 

 

Capital  contributed

Capital  reserves

Retained  earnings

Result from valuation of available-for-sale securities

Result from cash flow hedging transactions

Net  income

Minority interest

Total  equity

Figures in MXN millions

 

 

 

 

 

 

 

 

Balances at
1 January 2011

32,673

1,726

13,058

140

(213)

2,119

10

49,513

 

 

 

 

 

 

 

 

 

Movements inherent to the shareholders'
decision

 

 

 

 

 

 

 

 

  Transfer of result of prior years

-

106

2,013

-

-

(2,119)

-

-

   Cash dividends

-

-

(3,520)

-

-

-

-

(3,520)

   Other

-

-

(289)

-

-

-

-

(289)

Total

-

106

(1,796)

-

-

(2,119)

-

(3,809)

 

 

 

 

 

 

 

 

 

Movements for the recognition of the comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Net income

-

-

-

-

-

2,720

-

2,720

   Result from

     valuation of available-

     for-sale securities

-

-

-

618

-

-

-

618

   Result from cash flow

   hedging transactions

-

-

-

-

(254)

-

-

(254)

Total

-

-

-

618

(254)

2,720

-

3,084

Balances at
30 September 2011

32,673

1,832

11,262

758

(467)

2,720

10

48,788

 

 

 

 

BANK

 

Figures in MXN millions

Capital  contributed

Capital  reserves

Retained  earnings

Result from valuation of available-for-sale securities

Result from cash flow hedging transactions

Net  income

Minority interest

Total  equity

Balances at
1 January 2011

25,605

12,436

-

(48)

(213)

420

3

38,203

 

 

 

 

 

 

 

 

 

Movements inherent to

   the shareholders'

   decision

 

 

 

 

 

 

 

 

   Transfer of result of prior years

-

-

420

-

-

(420)

-

-

   Constitution of reserves

-

433

(433)

-

-

-

-

-

    Cash dividends

-

(1,800)

-

-

-

-

-

(1,800)

    Other

-

-

(289)

-

-

-

-

(289)

Total

-

(1,367)

(302)

-

-

(420)

-

(2,089)


 

 

 

 

 

 

 

 

Movements for the

   recognition of the

   comprehensive income

 

 

 

 

 

 

 

 

   Net income

-

-

-

-

-

1,315

-

1,315

   Result from

    valuation of available-

    for-sale securities

-

-

-

806

-

-

-

806

   Result from cash flow

   hedging transactions

-

-

-

-

(254)

-

-

(254)

   Others

-

-

1

-

-

-

-

1

Total

-

-

1

806

(254)

1,315

-

1,868

Balances at
30 September 2011

25,605

11,069

(301)

758

(467)

1,315

3

37,982

 

 

 

Consolidated Statement of Cash Flows

 

GROUP

 

Figures in MXN millions

30 Sep 2011



Net income

2,720

Adjustments for items not involving cash flow:

10,644

Gain or loss on appraisal of activities associated with investment & financing

(1,074)

Allowances for loan losses

4,771

Depreciation and amortisation

1,951

Provisions

3,414

Income tax and deferred taxes

1,249

Technical reserves

214

Discontinued operations

173

Undistributed income from subsidiaries

(54)

 

 

Changes in items related to operating activities:

 

Margin accounts

42

Investment securities

(20,359)

Repurchase agreements

(5,812)

Stock borrowing

3

Derivative (assets)

(21,784)

Loan portfolio

(14,139)

Receivables

(5,600)

Foreclosed assets 

(53)

Operating assets

(7,915)

Deposits

27,394

Bank deposits and other liabilities

6,996

Settlement accounts

(2,359)

Creditors repo transactions

(12,736)

Collateral sold or delivered as guarantee

312

Derivative (liabilities)

20,124

Subordinated debentures outstanding

427

Accounts receivables from reinsurers and coinsurers

(284)

Accounts receivables from premiums

(295)

Reinsurers and bonding

90

Other operating liabilities

26,900

Funds provided by operating activities

(9,048)

 

 

Investing activities:


Acquisition of property, furniture and equipment

3,813

Intangible asset acquisitions

(268)

Funds used in investing activities

3,545

 


Financing activities:


Cash dividends

(3,520)

Others

(289)

Funds used in financing activities

(3,809)



Financing activities:


Decrease in cash and equivalents

4,052

Cash and equivalents at beginning of period

51,324

Cash and equivalents at end of period

55,376

 

 

 

BANK

 

Figures in MXN millions

30 Sep 2011



Net income

1,315

Adjustments for items not involving cash flow:

9,426

Gain or loss on appraisal of activities associated with investment & financing

(1,072)

Allowances for loan losses

4,769

Depreciation and amortisation

1,951

Provisions

3,414

Income tax and deferred taxes

418

Undistributed income from subsidiaries

(54)

 

 

Changes in items related to operating activities:

 

Margin accounts

42

Investment securities

(5,295)

Repurchase agreements

(5,812)

Derivative (assets)

(21,785)

Loan portfolio

(14,139)

Receivables

(5,600)

Foreclosed assets 

(50)

Operating assets

(8,075)

Deposits

27,852

Bank deposits and other liabilities

6,996

Settlement accounts

(2,359)

Creditors repo transactions

(12,270)

Stock borrowing

3

Collateral sold or delivered as guarantee

(154)

Derivative (liabilities)

20,124

Subordinated debentures outstanding

427

Other operating liabilities

16,335

Funds provided by operating activities

(3,760)

 


Investing activities:


Acquisition of property, furniture and equipment

(951)

Intangible asset acquisitions

111

Funds used in investing activities

(840)

 

 

Financing activities:

 

Cash dividends

(1,800)

Other

(289)

Funds used in financing activities

(2,089)


 

Financing activities:

 

Decrease in cash and equivalents

4,052

Cash and equivalents at beginning of period

51,324

Cash and equivalents at end of period

55,376

 

 

 

Differences between Mexican GAAP and International Financial Reporting Standards (IFRS)

 

Grupo Financiero HSBC

 

HSBC Holdings plc, the ultimate parent of Grupo Financiero HSBC, reports its results under International Financial Reporting Standards (IFRS). Set out below is a reconciliation of the results of Grupo Financiero HSBC from Mexican GAAP to IFRS for the nine months ended 30 September 2011 and an explanation of the key reconciling items.

 

 

 

30 Sep

 

 

 Figures in MXN millions

2011

 

 

 

 

 

 

Grupo Financiero HSBC - Net Income Under Mexican GAAP

2,720

 

 

 

 

 

 

Differences arising from:

 

 

 

 

 

 

 

   Valuation of defined benefit pensions and post retirement healthcare benefitsW

72

 

 

   Acquisition costs relating to long-term investment contractsW

(5)

 

 

   Deferral of fees received and paid on the origination of loans

9

 

 

   Loan impairment chargesW

774

 

 

   Purchase accounting adjustmentsW

(146)

 

 

   Recognition of the present value in-force of long-term insurance contractsW

131

 

 

   Sale of 100% of the outstanding shares of a Social Security Company (Afore) W

976

 

 

   OtherW

834

 

 

Net income under IFRS

5,365

 

 

US dollar equivalent (millions)

443

 

 

Add back tax expense

1,866

 

 

Profit before tax under IFRS

7,231

 

 

US dollar equivalent (millions)

597

 

 

Exchange rate used for conversion

12.11

 

 

 

 

 

 

W Net of tax at 30%.

 

Summary of key differences between Grupo Financiero HSBC's results as reported under Mexican GAAP and IFRS

 

Valuation of defined benefit pensions and post retirement healthcare benefits

Mexican GAAP

Defined benefit pension costs and the present value of defined benefit obligations are calculated at the reporting date by the schemes' actuaries using the Projected Unit Credit Method and real interest rates.

 

IFRS

Defined benefit pension costs and the present value of defined benefit obligations are calculated at the reporting date by the schemes' actuaries using the Projected Unit Credit Method. The net charge to the income statement mainly comprises the current service cost, plus the unwinding of the discount rate on plan liabilities, less the expected return on plan assets, and is presented in operating expenses. Past service costs are charged immediately to the income statement to the extent that the benefits have vested, and are otherwise recognised on a straight-line basis over the average period until the benefits vest. Actuarial gains and losses comprise experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred), as well as the effects of changes in actuarial assumptions. Actuarial gains and losses are recognised in other comprehensive income in the period in which they arise.

 

Acquisition costs of long-term investment contracts

Mexican GAAP

All costs related to the acquisition of long-term investment contracts are expensed as they are incurred.

 

Summary of key differences between Grupo Financiero's results as reported under Mexican GAAP and IFRS (continued)

 

IFRS

Incremental costs relating to the acquisition of long-term investment contracts are deferred and amortised over the expected life of the contract.

 

Fees paid and received on the origination of loans

Mexican GAAP

From 1 January 2007, loan origination fees are required to be deferred and amortised over the life of the loan on a straight line basis. Prior to 2007, loan origination fees were recognised up-front.

 

IFRS

Fees and expenses received or paid on origination of a loan that are directly attributable to the origination of that loan are accounted for using the effective interest rate method over the expected life of the loan. This policy has been in effect since 1 January 2005.

 

Loan impairment charges

Mexican GAAP

Loan impairment charges are calculated following the rules issued by the Mexican Ministry of Finance and the National Banking and Securities Commission. Such rules establish methodologies for determining the amount of provision for each type of loan.

 

IFRS

Impairment losses on collectively assessed loans are calculated as follows:

 

·      When appropriate empirical information is available, the Bank utilises roll rate methodology. This methodology employs statistical analysis of historical data and experience of delinquency and default to estimate the amount of loans that will eventually be written off as a result of events occurring before the balance sheet date which the Bank is not able to identify on an individual loan basis, and that can be reliably estimated.

·      In other cases, loans are grouped together according to their credit risk characteristics for the purpose of calculating an estimated collective loss.

 

Impairment losses on individually assessed loans are calculated by discounting the expected future cash flows of a loan at its original effective interest rate, and comparing the resultant present value with the loans current carrying value.

 

Purchase accounting adjustments

Purchase accounting adjustments arose from the valuation of assets and liabilities on acquiring Grupo Financiero Bital in November 2002 under IFRS. Under Mexican GAAP, a different valuation methodology is applied.

 

Recognition of present value of in-force long-term life insurance contracts

Mexican GAAP

The present value of future earnings is not recognised. Premiums are accounted for on a received basis and reserves are calculated in accordance with guidance as set out by the Insurance Regulator (Comisión Nacional de Seguros y Fianzas).

 

IFRS

A value is placed on insurance contracts that are classified as long-term insurance business and are in-force at the balance sheet date. The present value of in-force long-term insurance business is determined by discounting future earnings expected to emerge from business currently in force using appropriate assumptions in assessing factors such as recent experience and general economic conditions.

 

ends/all


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